3-2-1 vs 1-0 Buydown Mortgages

Justin Kelly
April 15, 2025

Buying a home in today’s market means understanding your financing options. One way to ease into your monthly payments, especially in the first few years of homeownership, is through a mortgage buydown. But not all buydowns are created equal.

In this post, we’ll break down what 3-2-1 and 1-0 buydown mortgages are, how they work, and how they differ from a permanent buydown. If you're planning to buy a home and want to lower your mortgage payments, this is a strategy worth knowing.

What Is a Mortgage Buydown?

A mortgage buydown is a financing tool that allows a borrower to reduce their interest rate by paying an upfront fee. This lowers monthly mortgage payments either temporarily or permanently. Buydowns are often negotiated as part of a purchase contract and can be paid by the buyer, seller, builder, or lender.

There are two main types of buydowns:

  • Temporary buydowns (such as 3-2-1 or 1-0)
  • Permanent buydowns

Understanding how each one works can help you decide which makes the most financial sense for your situation.

Temporary Buydowns: 3-2-1 and 1-0 Explained

What Is a 3-2-1 Buydown?

A 3-2-1 buydown provides a temporary reduction in the mortgage interest rate for the first three years of the loan:

  • Year 1: Interest rate is 3% lower than the note rate
  • Year 2: 2% lower
  • Year 3: 1% lower
  • Year 4 and beyond: Full note rate applies

This option can be especially attractive for buyers who expect their income to increase over time or who want to ease into higher payments.

What Is a 1-0 Buydown?

A 1-0 buydown is a simpler version that lowers the interest rate by 1% for just the first year:

  • Year 1: 1% lower
  • Year 2 and onward: Full note rate resumes

This option works well for buyers who want a short-term cushion as they transition into homeownership.

Who Typically Pays for a Temporary Buydown?

Temporary buydowns must be funded by the seller as an incentive for buyers.

Permanent Buydowns: A Long-Term Strategy

A permanent buydown, also called paying discount points, involves paying a one-time upfront fee to reduce the interest rate for the entire life of the loan. This can result in significant long-term savings on interest.

For example:
- On a $300,000 loan, paying one point (1% of the loan, or $3,000) could reduce your rate by approximately 0.25%.
- That lower rate remains in effect for the entire term of the loan, whether it's 15 or 30 years.

This strategy is best for buyers who plan to stay in the home for many years and want to minimize their total interest cost over time.

Key Differences: Temporary vs. Permanent Buydowns

FeatureTemporary Buydown (3-2-1, 1-0)Permanent Buydown
DurationTemporary (1-3 years)Full loan term
Payment SourceOften seller or lenderTypically paid by buyer
GoalEase into paymentsLower payments long-term
Best ForBuyers with future income growth or short-term savings goalsBuyers staying long-term and focused on total interest savings

Which Option Is Right for You?

The right choice depends on your financial goals and how long you plan to stay in the home. If you’re expecting future income growth or want to reduce your initial costs, a temporary buydown might be the better option. If you’re planning to stay in your home long-term, a permanent buydown can offer more savings over time.

At CPF Mortgage, we help you evaluate your options based on your individual needs. Whether you're a first-time buyer or refinancing, we’ll walk you through every step to ensure your mortgage strategy works for youβ€”not just today, but for years to come.

Ready to see how a buydown could work for you? Let’s talk through your numbers and customize a mortgage plan that fits.

Contact CPF Mortgage today to get started. We proudly serve homebuyers in Florida, Georgia, Tennessee, and Colorado.

If you have any questions about 3-2-1, 1-0 buydown options, or permanent rate buydowns, don’t hesitate to reach out. Give us a call at 727-226-1040 β€” we're here to help you understand your mortgage options and make the best decision for your home financing goals.

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Christopher Paul Financial, LLC dba CPF Mortgage is a Florida mortgage lender NMLS 222883, Florida state license MLD929, Colorado registered mortgage company NMLS 222883, licensed Tennessee mortgage lender NMLS 222883, and Georgia Residential Mortgage Licensee NMLS 222883. The main office is located at 10710 State Road 54, Ste. C101, Trinity, FL 34655. All loan approvals are credit driven, and all decisions are based on underwriting credit approvals. All rates, terms, and programs are subject to change without notice. Borrowers should consider their options carefully when choosing a loan program.
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